Brian Lenihan

Brian Lenihan , the former Minister for Finance in the Irish Republic who died
on June 10 aged 52, presided over the total collapse of the Irish banking
system in 2008, which led to the fall of the government two years later.

Photo: PA

2:22PM BST 10 Jun 2011

When the end of the property bubble revealed the enormous extent of impaired debts, Lenihan’s response to the threat of a run on the banks was to legislate a blanket government guarantee to bank depositors and, crucially, also to the banks’ bondholders, or international creditors.

This binding promise to honour obligations to institutional lenders in the wholesale money markets proved disastrous when taxpayers realised that they had been unfairly saddled with the debts of foreign speculators, and the ensuing election last March cost the Fianna Fail party three quarters of their seats, while their coalition partners, the Greens, lost all of theirs.

Lenihan, who was credited with a keen academic mind, was an advocate with no business experience or acumen, and rather naively accepted the brief from his civil servants, who had been informed by the banks that the debt exposure was only about 0.85 per cent of lending.

In the event it turned out to be nearer 50 per cent, and the crippling liability of 400 billion euros forced Lenihan to seek the IMF and European Central Bank bail-out last November, to which Britain also contributed a loan of £7 billion, and which necessitated a four-year programme of austerity budgets.

Brian Lenihan was born in Dublin on May 21 1959 into Ireland’s largest political dynasty. His father — also Brian — was the longest serving Fianna Fail cabinet minister in the history of the state, and was a wily political operator, once credited with having trees planted in suburban housing estates during an election campaign, later having them uprooted and returned to the donors.

Lenihan’s grandfather Patrick and his aunt Mary O’Rourke were also elected members of the Dail, as was his brother Conor.

He was educated by the Jesuits at Belvedere College, and took Law degrees at Dublin University and Cambridge, and was called to the Irish Bar in 1984. He was first elected to the Dail in 1996 in the Dublin West constituency by-election, following his father’s death.

After the 2002 general election he became junior Minister for Children, and in 2007 was Minister for Justice. A year later he became Finance Minister in succession to Brian Cowen, who had replaced Bertie Ahern as Taoiseach.

This pitched him into the banking crisis, as the credit crunch struck and Lehman Brothers collapsed. Pressure mounted from the United States government to underwrite the debts — Timothy Geithner, United States Secretary of the Treasury, feared that an Irish bank debt default, while not threatening of itself, could have spread contagion to the entire European system, to which American-backed “credit default swaps” were exposed to the tune of 120 billion euros.

This was later confirmed by State Department cables leaked through WikiLeaks. Alistair Darling, then Britain’s Chancellor, was severely critical of the guarantee, which put the British financial system at a disadvantage in the markets. Lenihan described the guarantee, which other countries soon copied, as “the cheapest bail-out in the world”, words which would haunt him.

A severe budget followed in November 2008, and Lenihan promised that there was no more bad medicine in store, but the following May he introduced a supplementary budget, further cutting spending and increasing taxation, and demonstrating that the full depths of the financial crisis remained unsounded. In successive budgets in 2009 and 2010, the debt mountain continued to grow, with the bank costs adding to a government deficit, and necessitating the international bail-out, in which Lenihan was criticised for not driving a harder bargain.

If, in fact, the whole European system was at risk, critics suggested, then Lenihan could have extracted more generous terms than the crippling 5.8 per cent interest rate agreed with the IMF and EU, and which was considerably higher than the rates applied to Greece and Portugal. The Nobel Prize-winning economist Joseph Stiglitz said that the Irish government was “squandering” public money with its plan to bail out the banks.

The biggest casualty was Anglo Irish Bank, which had no high-street presence but lent money to property developers and had operations in Austria, Switzerland, the United Kingdom, the United States, and the Isle of Man, and which was recapitalised by 20 billion euros. One of Lenihan’s last acts was to institute a state-owned “bad bank”, the National Asset Management Agency, which took on 77 billion euros worth of bad debts of all the banks in exchange for discounted bonds.

At Christmas 2009 it was revealed that Lenihan was suffering from pancreatic cancer, which prompted a debate about privacy, and divided public opinion between sympathy and censure. But Lenihan’s affability, assured television manner and personal appeal ensured his re-election last March, when he was the only Fianna Fail member in Dublin to survive that poll.

Following Brian Cowen’s retreat from political life, Lenihan became Deputy Leader of Fianna Fail.

Brian Lenihan married, in 1997, Patricia Ryan, a judge of the Circuit Court. They had two children.